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LIC 3rd strongest & 10th Most Valuable Globally, Offers Highest RoE of 82%: Crisil Report 

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LIC 3rd largest globally, but offers highest RoE of 82%

In accordance with the report by Crisil, LIC (Life Insurance Corporation of India), India’s largest IPO (Initial Public offering)-bound national insurer and 3rd strongest insurance brand globally, LIC (Life Insurance Corporation of India), offers the highest Return on Equity (RoE) at 82% amongst all its global peers.

  • Its RoE is followed by Ping An Insurance of China, the world’s largest insurer at 19.5%, Aviva at 14.8%, and China Life Insurance at 11.9%.
  • ROE considers the depth of a corporation’s profitability and how efficient it is in generating profits.

This report by Crisil was made in November 2021 and is not yet made publicly available.

LIC, 3rd Strongest & 10th most Valuable Insurance Brand Globally 

According to a brand valuation report by London-based Brand Finance, LIC is India’s strongest and the largest brand in the country with a valuation of $8.656 billion (around Rs 64,722 crore). With this, it also becomes the third-strongest insurance brand globally after Poste Italiane of Italy, and Mapfre of Spain at 1st and 2nd rank respectively.

  • It is also the world’s 10th most valuable insurance brand.

LICs Portfolio:

i.Amongst the top global insurers, LIC is the only Indian player and is ranked 5th globally in terms of life insurance premium and 10th in terms of total assets. 

  • It should be noted that, in terms of total assets, LIC is 6th largest with $522 billion clipping at 8% annually between 2019 and 2021. It was topped by China’s Ping An ($1.38 trillion) during this period.

ii.In terms of profitability, LIC’s net income is $ 406 million in fiscal 2021 as against Ping An’s $23.1 billion.

iii.It is projected that LIC’s market value will become Rs 43.40 lakh crore by 2022, and Rs 58.9-lakh crore by 2027.

iv.It has a large agency network of 1.35 million individual agents, asset management capabilities, leverage and operational efficiencies. LIC’s agent network is 7.2 times the numbers of agents of the second-largest life insurer SBI Life.

LIC’s market share Highest among Globally:

LIC’s market share is highest among the globe i.e. 64.1% or with a gross written premium (GWP) of $56.405 billion. It is followed by Ping An Insurance and China Life Insurance, with 21% and 20%. 

  • The largest Japanese player Nippon Life’s market share is only 16.2%. 
  • In the United States (US), the top 15 account for 60 per cent of the total market in the year 2020. NorthWestern Mutual Life tops the list with 8.4 per cent, followed by Metlife Inc at 7.6 per cent and New York Life at 7.5 per cent.

Global Life Insurance to bounce back, LIC will grow higher:

Amid COVID-19, the global life insurance market contracted 3.1% (-3.1%) to $.79 trillion from $2.88 trillion in 2019. The advanced marked faced solid contractions by 3.9% (-3.9%) as compared to emerging markets, which degrew just 30 bps.

  • The global life premium is expected to rebound from the pandemic phase, with annual growth of 3.8% in 2021 and 4% in 2022.
  • The scope for LIC to grow is even higher given the massive $16.5 trillion protection gap in the country as of 2019, which was much higher compared with its Asian counterparts.

Listing of LIC:

i.The listing of LIC will make it aone of the top five largest companies in terms of market cap, joining the club of Reliance Industries, TCS and HDFC Bank. The embedded value of LIC is over Rs 5 lakh crore.

ii.It’s listing is also crucial for the government to meet the lowered revenue estimates of Rs 78,000 crore for FY22. 

  • Till now, the Centre has raised around Rs 12,000 crore from privatization of Air India and stake sale in other PSUs (Public Sector Undertakings).

iii.The Central Government also plans to raise $12 billion from selling a stake in the IPO, which is expected before the end of FY22 as LIC has a majority share of the life insurance market in India.  

  • LIC is 100% government owned.
  • Till date, the biggest IPO in the Indian stock market has been that of Paytm’s parent firm One97 Communications, which raised close to Rs 18,000 crore, followed by Coal India, which raised around Rs 15,000 crore in 2010. 

Point to be noted:

LIC’s market share has declined from 100% in the pre-2000 era to 71.8 % in 2016 and further down to 64.1% in 2020 but still it is the largest. In comparison with SBI Life, which is the second-largest in the country, the same was only 5% in 2016 and 8% in 2020. This market share gap between the largest and the second largest in India is nowhere else in the world.

Recent Related News:

i.In September 2021, the Life Insurance Corporation (LIC) of India made an agreement with the Department of Posts (DoP) for availing of the ‘Print to Post’ solution. The Print to Post, which is an end-to-end solution provided by the Department of Post will be useful for LIC for printing and dispatching the policy booklet issued under a life insurance policy.

ii.The Government of India has appointed 10 merchant bankers for managing Initial Public Offering (IPO) of Life Insurance Corporation (LIC) which is being held between January to March 2022. The name of the 10 merchant bankers are: Goldman Sachs (India) Securities; Citigroup Global Markets India; Nomura Financial Advisory and Securities India; SBI Capital Market; JM Financial; Axis Capital; BofA Securities; JP Morgan India; ICICI Securities; Kotak Mahindra Capital Co Ltd.

About Life Insurance Corporation (LIC) of India:

Chairperson – M R Kumar
Managing Directors– Raj Kumar, Siddhartha Mohanty, Ipe Mini, BC Patnaik
Headquarters – Mumbai, Maharashtra